Is FB Stock a Media Stock?
CEO Mark Zuckerberg has finally admitted that Facebook Inc (NASDAQ:FB) is more than just a tech company; an admission that he hopes will stop the bleeding of FB stock.
For those who may not know, FB stock has been getting crushed ever since the election. The fake news stories that went viral on Facebook—which some people claim swung the presidential election—have become a real drag on the outlook of FB stock.
Things got worse when a deranged man allegedly acted on one of the fake news stories. A gunman fired several shots at a Washington, D.C. pizzeria, which was supposedly where Hillary Clinton ran a purported child prostitution ring. It was an absurd and untrue story, but the gunman believed it to be fact.
Many people blamed Facebook for allowing these fake news stories to go viral. They argued that the company needs to vet its content more thoroughly. CEO Mark Zuckerberg had brushed those concerns aside before the pizzeria incident.
He insisted that Facebook was simply a tech company; not an “arbiter of truth.” Nonetheless, institutional investors weren’t too happy about FB stock getting caught in the political crossfire. They pared back their bullishness on FB stock in the weeks that followed. (Source: “Data Sheet – Zuckerberg owns up,” Fortune, December 23,2016.)
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But as it happens, FB stock was already under siege for its faulty advertising metrics. The company had been misstating several numbers that advertisers use to measure the performance of their campaigns. This was also a major concern among shareholders.
The constant stream of bad news was eating away at previous gains FB stock had accrued, helped along by Zuckerberg’s insistence that Facebook was just a tech company.
But now Mark Zuckerberg is taking a stand. Apparently, the pizzeria incident was the straw that broke the camel’s back, because he immediately commissioned a set of tools that would help combat fake news.
Then, in a live discussion with his COO, Sheryl Sandberg, Zuckerberg conceded that Facebook “does a lot more than just distribute new, and [is] an important part of the public discourse.”
These steps have helped triage the damage done to FB stock. After all, the company lost eight percent of its market share in the last three months. I can’t remember the last time that happened to Facebook—it has been on a steady rise since mid-2013.
Anyone who invested in FB stock back then would have more than tripled their money. This is because Facebook is truly amazing. Both its top and bottom lines keep beating analysts’ estimates, which is why the stock outperforms every year.
But this string of bad news was poison. Luckily for FB stock, Mark Zuckerberg seems to have realized that sunlight is the best disinfectant. He accepts that Facebook should act more like a media company, and that admission could help calm down institutional investors.
In the end, this was just damage control so that FB stock could resume its upward climb.